What This Massive Overnight Rally Accomplishes, Finally

Hourly ES S&P 500 Futures Chart

The answer to the headline question is: So far, nothing.

The rally has carried right up to the crash trendline, but no further. A pop through 2330 will finally break the crash trend. But I wouldn’t get too excited about that either. There’s a resistance cluster around 2385-2400 that needes to be cleared to put the market in position for a move to 2500.

Intraday cycle remain on the buy side, but they’ve reached the level where they topped out on the last big intraday pop. So we are again at an inflection point. That’s become an everyday occurrence. 

The pivot low was 2167. A rollover below 2330 would make that the target.

(Click on image to enlarge)

S&P Futures Daily Chart

You can also see on the daily chart that the initial crash channel has been broken at 2260. But there are layers of resistance at 2360, 2385 and 2440 that would need to be cleared to get the market into the clear for a much bigger pop.

If this rally holds, then the 2315 area would become support. If it doesn’t hold, the old upper crash channel line would hardly be support. A failure to extend the rally could result in rapid deterioration. 

The condition of momentum and MACD are hardly the basis for expecting much of a rally. Positive divergences should show up before a sustained rally begins.

Again, this is for the perspective of one day only.

(Click on image to enlarge)

Department of Wash, Rinse Repeat – There’s no oversold parameter in a crash. Positive divergences are almost certainly necessary to form a good swing low. There are no positive divergences on the daily chart yet.

S&P Cash Index Hourly Chart

The red bar at the far right shows where the futures have been trading overnight. The range again neatly corresponds with the upper and lower trendlines on the hourly chart of the cash market in regular trading hours. That’s between 2240 and 2385 at the open.

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